{"id":23237,"date":"2023-11-22T09:56:01","date_gmt":"2023-11-22T14:56:01","guid":{"rendered":"https:\/\/www.zolo.ca\/blog\/?p=23237"},"modified":"2023-11-22T10:30:46","modified_gmt":"2023-11-22T15:30:46","slug":"why-is-housing-so-expensive-in-canada","status":"publish","type":"post","link":"https:\/\/www.zolo.ca\/blog\/why-is-housing-so-expensive-in-canada","title":{"rendered":"Why is Housing So Expensive in Canada?"},"content":{"rendered":"\n\n\n<p>It\u2019s no secret that housing is expensive in Canada, with <a href=\"https:\/\/www.ctvnews.ca\/canada\/millions-of-canadian-homes-are-unaffordable-over-crowded-or-in-need-of-major-repairs-new-census-data-1.6591998#:~:text=The%20census%20results%20show%20that,the%20poverty%20line%20(69%20per\">one in six Canadians<\/a> living in housing deemed unaffordable by Statistics Canada. But housing in Canada wasn\u2019t always like this. While there were pockets of the country with high prices (like <a href=\"https:\/\/www.zolo.ca\/toronto-real-estate\">Toronto<\/a> and <a href=\"https:\/\/www.zolo.ca\/vancouver-real-estate\">Vancouver<\/a>), home prices in Canada have risen by about a third since the pandemic started, causing many areas of the country to become unaffordable for Canadians looking to buy their first home.<\/p>\n\n\n\n<p>But how did we get here? The answer isn\u2019t straightforward due to a perfect storm of factors. So why is housing so expensive in Canada? Will they drop in the future? Are there still affordable places to live in Canada? Keep reading to find out.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-key-takeaways\">Key Takeaways<\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>Rising populations, not enough new home construction, and artificially low interest rates have caused home prices to balloon<\/li><li>Many markets in Canada are overpriced, but some provinces like New Brunswick, are still affordable<\/li><li>Homebuyers shouldn\u2019t try to time the market and should instead make sure they can afford the homes they buy<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"what\u2019s-the-average-home-price-in-canada?\">What\u2019s the Average Home Price in Canada?<\/h2>\n\n\n\n<p>In September, the <a href=\"https:\/\/www.crea.ca\/housing-market-stats\/canadian-housing-market-stats\/national-price-map\/\">average of a home in Canada<\/a> was $655,507. This might seem high, but home prices in Canada have been slowly rising for decades. That said, the pandemic kicked Canadians\u2019 desire for safe and secure housing into high gear. Pair that with more disposable income since everyone had to stay home, and home prices have risen approximately 34% since 2018.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"1023\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2023\/11\/136005-Zolo_Why-is-housing-so-expensive_Visual-A_Superside_V1-1024x1023.jpg\" alt=\"\" class=\"wp-image-23243\"\/><\/figure>\n\n\n\n<p>While the average price of $655,507 looks pretty high, you don\u2019t need to save the total amount to buy a home for this price. You\u2019ll only need a percentage of this amount as a down payment. If you were purchasing a home at this price, you would need a down payment of 6.2%, or $40,642.<\/p>\n\n\n\n<p>The average price of a home is high, but Canada is a country of regional real estate markets, and the average price of homes varies widely depending on the city and province you choose to call home. So, if you are looking at the average home price in Canada and thinking, that\u2019s too expensive for me, consider choosing one of the more affordable provinces to put down roots.<\/p>\n\n\n\n<div id=\"footable_parent_23247\"\n         class=\" footable_parent ninja_table_wrapper loading_ninja_table wp_table_data_press_parent semantic_ui \">\n                    <h3 class=\"table_title footable_title\">Average Home Prices by Province<\/h3>\n                        <table data-ninja_table_instance=\"ninja_table_instance_0\" data-footable_id=\"23247\" data-filter-delay=\"1000\" aria-label=\"Average Home Prices by Province\"            id=\"footable_23247\"\n           data-unique_identifier=\"ninja_table_unique_id_1552242073_23247\"\n           class=\" foo-table ninja_footable foo_table_23247 ninja_table_unique_id_1552242073_23247 ui table  nt_type_legacy_table selectable hide_horizonal_borders hide_vertical_borders striped compact vertical_centered  footable-paging-right ninja_table_search_disabled ninja_table_pro\">\n                <colgroup>\n                            <col class=\"ninja_column_0 \">\n                            <col class=\"ninja_column_1 \">\n                    <\/colgroup>\n        <thead>\n<tr class=\"footable-header\">\n                                        <th scope=\"col\"  class=\"ninja_column_0 ninja_clmn_nm_province \">Province<\/th><th scope=\"col\"  class=\"ninja_column_1 ninja_clmn_nm_average_home_price \">Average Home Price<\/th><\/tr>\n<\/thead>\n<tbody>\n\n        <tr data-row_id=\"17024\" class=\"ninja_table_row_0 nt_row_id_17024\">\n            <td>British Columbia<\/td><td>$969,306<\/td>        <\/tr>\n            <tr data-row_id=\"17025\" class=\"ninja_table_row_1 nt_row_id_17025\">\n            <td>Alberta<\/td><td>$459,105<\/td>        <\/tr>\n            <tr data-row_id=\"17026\" class=\"ninja_table_row_2 nt_row_id_17026\">\n            <td>Saskatchewan<\/td><td>$328,000<\/td>        <\/tr>\n            <tr data-row_id=\"17027\" class=\"ninja_table_row_3 nt_row_id_17027\">\n            <td>Manitoba<\/td><td>$351,445<\/td>        <\/tr>\n            <tr data-row_id=\"17028\" class=\"ninja_table_row_4 nt_row_id_17028\">\n            <td>Ontario<\/td><td>$851,756<\/td>        <\/tr>\n            <tr data-row_id=\"17029\" class=\"ninja_table_row_5 nt_row_id_17029\">\n            <td>Quebec<\/td><td>$499,911<\/td>        <\/tr>\n            <tr data-row_id=\"17030\" class=\"ninja_table_row_6 nt_row_id_17030\">\n            <td>Newfoundland and Labrador<\/td><td>$295,400<\/td>        <\/tr>\n            <tr data-row_id=\"17031\" class=\"ninja_table_row_7 nt_row_id_17031\">\n            <td>Prince Edward Island<\/td><td>$365,200<\/td>        <\/tr>\n            <tr data-row_id=\"17032\" class=\"ninja_table_row_8 nt_row_id_17032\">\n            <td>New Brunswick<\/td><td>$292,600<\/td>        <\/tr>\n            <tr data-row_id=\"17033\" class=\"ninja_table_row_9 nt_row_id_17033\">\n            <td>Nova Scotia<\/td><td>$398,000<\/td>        <\/tr>\n    <\/tbody><!--ninja_tobody_rendering_done-->\n    <\/table>\n    \n    \n    \n<\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\" id=\"why-are-canadian-house-prices-so-high?\">Why are Canadian House Prices so High?<\/h2>\n\n\n\n<p>High house prices are not a new phenomenon in Canada, but we can trace back to a series of factors that, working together, have resulted in inflated home prices.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">A Growing Population Needs a Place to Call Home<\/h3>\n\n\n\n<p>Canada is likely one of the <a href=\"https:\/\/www.ctvnews.ca\/canada\/immigrants-drove-canada-s-record-population-growth-this-year-statcan-report-1.6579745\">fastest-growing countries in the world<\/a>, with a population surpassing 40 million in June of this year and a growth rate of 2.9% &#8211; higher than all other G7 countries and among the fastest-growing countries in the world.<\/p>\n\n\n\n<p>The vast majority (98%) of that growth comes from immigration, and those new Canadians need places to live. While these newcomers to Canada are essential to help solve the labour shortage problem and offset Canada\u2019s <a href=\"https:\/\/globalnews.ca\/news\/9988609\/canada-births-2022-statcan\/#:~:text=Canada%20is%20considered%20a%20low,a%20steady%20decline%20since%202009.\">falling birth rate<\/a>, this increased demand has put upward pressure on home prices as more people compete for housing.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"1025\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2023\/11\/136005-Zolo_Why-is-housing-so-expensive_Visual-B_Superside_V1-1024x1025.jpg\" alt=\"\" class=\"wp-image-23244\"\/><\/figure>\n\n\n\n<p>While a jump from 1.09% to 2.9% might not seem significant, that is the difference between 374,306 new Canadians in 2012 and 1,115,175 new Canadians in 2023. And all of those new Canadians need a place to live.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">New Construction is Not Keeping Pace with Demand<\/h3>\n\n\n\n<p>A second answer to the question why is housing so expensive in Canada is that we aren&#8217;t building enough homes to keep up with demand. With all of these new Canadians entering the country and needing a place to live, is the pace of new home construction keeping up? Not so much. Economists can forecast how many new homes are being constructed by monitoring the value of building permits issued for single-family homes.<\/p>\n\n\n\n<p>The more permits are issued, the more homes are being built, the more housing is available for Canadians.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/10-most-expensive-homes-in-vancouver\">The 10 Most Expensive Houses for Sale in Vancouver, BC<\/a><\/p><\/section>\n\n\n\n<p>With all of these newcomers to Canada, logic would follow that builders, seeing this opportunity, would scramble to build more homes, right? Wrong.&nbsp;<\/p>\n\n\n\n<p>According to the <a href=\"https:\/\/www.theglobeandmail.com\/business\/article-single-family-home-building-permits-canada\">Globe and Mail<\/a>, in June 2023, the value of building permits issued for single-family homes actually fell 35% compared to the previous year. After adjusting for inflation, building permits for single-family homes are as low as during the pandemic.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"1025\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2023\/11\/136005-Zolo_Why-is-housing-so-expensive_Visual-C_Superside_V1-1024x1025.jpg\" alt=\"\" class=\"wp-image-23245\"\/><\/figure>\n\n\n\n<p>So why aren\u2019t builders jumping at the opportunity to capitalize on the demand for new homes? Again, that\u2019s not an easy question to answer. There are labour shortages, supply shortages, and increasing materials costs cutting into profitability. However, one of the key culprits may be that interest rates have increased substantially in recent years.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Artificially Low Interest Rates Lead to Big Mortgages<\/h3>\n\n\n\n<p>While interest rates have increased in recent years, they were at historically low levels for the decade before that, thanks to the 2008 financial crisis. Low interest rates meant Canadians had a decade of readily available access to low-cost debt, and they used that debt to enter the housing market, driving prices up.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"978\" loading=\"lazy\" src=\"https:\/\/www.zolo.ca\/blog\/wp-content\/uploads\/2023\/11\/136005-Zolo_Why-is-housing-so-expensive_Visual-D_Superside_V1-1024x978.jpg\" alt=\"\" class=\"wp-image-23246\"\/><\/figure>\n\n\n\n<p>Access to affordable interest rates and inexpensive debt has come to a halt in recent years. Thanks to rampant inflation and an aggressive (but necessary) rate-hiking campaign from the Bank of Canada, Canadians (and builders) no longer have access to low interest debt. While increased interest rates did help to cool the housing market somewhat between 2022 and 2023, it also made building new housing more expensive and less profitable to build.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"are-canadian-homes-overpriced?\">Are Canadian Homes Overpriced?<\/h2>\n\n\n\n<p>Canadian home prices are high, but are they overpriced? A recent poll conducted by Nanos Research for Bloomberg News indicated that 70% of respondents said they would be at least somewhat happy if home prices went down. This survey and <a href=\"https:\/\/www.moodysanalytics.com\/whitepapers\/pa\/2023\/rps-ma-canada-housing-market-outlook-more-struggles-ahead\">expert analysis<\/a> from firms like Moody\u2019s Analytics have indicated that Canadian homes have been overpriced for several years.&nbsp;<\/p>\n\n\n\n<p>That doesn\u2019t mean you should avoid purchasing a home or that prices are guaranteed to drop in the future.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/how-much-mortgage-can-you-afford\">How Much Mortgage Can I Afford? Is 30% of My Income Realistic?<\/a><\/p><\/section>\n\n\n\n<p>As we explained above, housing is expensive in Canada for many reasons, and while home prices may drop in major centres like Toronto and Vancouver, home prices in other cities like Winnipeg, Halifax, and Quebec City are expected to remain steady.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"where-are-the-cheapest-places-to-live-in-canada?\">Where are the Cheapest Places to Live in Canada?<\/h2>\n\n\n\n<p>If you\u2019re looking for a less expensive place to call home, consider moving to a province with cheaper housing. Provinces like New Brunswick (average home price of $292,600) or Newfoundland and Labrador (average home price of $295,400) have home prices significantly lower than those in more populated provinces like Ontario and British Columbia.<\/p>\n\n\n\n<p>Keep in mind, however, that these provinces have lower home prices because it can be challenging to find employment there, and their populations are much smaller (and the amenities to support those populations are more scarce). Alternatively, you could consider moving to an affordable city in your home province, and we\u2019ve created a list of the most affordable places to live in <a href=\"https:\/\/www.zolo.ca\/blog\/most-affordable-cities-alberta\">Alberta<\/a>, <a href=\"https:\/\/www.zolo.ca\/blog\/most-affordable-cities-bc\">British Columbia<\/a>, and <a href=\"https:\/\/www.zolo.ca\/blog\/most-affordable-cities-ontario\">Ontario<\/a> to help you choose.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"will-house-prices-go-down-in-2024?\">Will House Prices Go Down in 2024?<\/h2>\n\n\n\n<p>The main drivers behind why is housing so expensive in Canada is too much demand (population growth) and not enough supply (new buildings), with rising and falling mortgage rates acting as a type of lever, either reducing or increasing the supply of new homes as they rise and fall. Until demand reduces or supply increases (or both), home prices are unlikely to see a meaningful decline. That doesn\u2019t mean home prices won\u2019t drop in 2024.<\/p>\n\n\n\n<section class=\"wp-block-zolo-related flex items-center py-6 leading-tight border-t border-b border-blacklight undefined\"><p class=\"font-serif pr-6 md:pr-12 mr-6 md:flex-shrink-0 border-r border-blacklight\">Related content<\/p><p class=\"related-link w-full my-0\"><a href=\"https:\/\/www.zolo.ca\/blog\/mortgage-qualification\">How to Qualify for a Mortgage in Canada<\/a><\/p><\/section>\n\n\n\n<p>It\u2019s unlikely that we will see pandemic-era low interest rates in the future. Because of this, overpriced markets, like Toronto, Vancouver, and even Calgary, are more vulnerable to price drops. In fact, these markets are <a href=\"https:\/\/www.moodysanalytics.com\/whitepapers\/pa\/2023\/rps-ma-canada-housing-market-outlook-more-struggles-ahead\">already softening<\/a>. Price increases in small population centres like Halifax or Winnipeg will likely slow, but they may not drop.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"should-you-wait-for-home-prices-to-fall-before-buying-a-home?\">Should You Wait for Home Prices to Fall Before Buying a Home?<\/h2>\n\n\n\n<p>It\u2019s important to remember that timing the market is a tough thing to do. No one knows definitively whether home prices will go up or down. This is because such a wide range of factors influence home prices. Don&#8217;t ask whether home prices will rise or fall or if now is a good time to buy. These are hard questions to answer. Instead, ask yourself whether now is a good time <em>for you to buy<\/em>.<\/p>\n\n\n\n<p>Are you financially ready to be responsible for a mortgage, property taxes, and the upkeep associated with a home? Can you afford to buy a home and continue to prioritize your other money goals like retirement and debt repayment? Do you have a big enough down payment, or should you save longer? These are the most important factors that determine whether now is a good time to buy a home.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>How low supply and high demand can create high house prices and an inflated real estate market<\/p>\n","protected":false},"author":91,"featured_media":23238,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"guide":[],"class_list":["post-23237","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-trends"],"acf":[],"zolo_excerpt":"","_links":{"self":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/23237","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/users\/91"}],"replies":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/comments?post=23237"}],"version-history":[{"count":4,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/23237\/revisions"}],"predecessor-version":[{"id":23250,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/posts\/23237\/revisions\/23250"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/media\/23238"}],"wp:attachment":[{"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/media?parent=23237"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/categories?post=23237"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/tags?post=23237"},{"taxonomy":"guide","embeddable":true,"href":"https:\/\/www.zolo.ca\/blog\/wp-json\/wp\/v2\/guide?post=23237"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}